Hogs see production cuts, while cattle feels bearish

Livestock report

Hogs: Allendale estimates the breeding herd fell from 0.8% higher than last year on June 1 down to 0.1% higher on Sept. 1. The average guess, compiled of all livestock economists who release estimates, suggests a little more dramatic 0.3% decline from last year.

A little more interesting are the farrowing estimates for the next two quarters. The average guess looks for this September/November quarter to decline 1.4% from last year. December/February farrowings are seen down 1.7%.

The message here for the pork industry is that production cuts are happening now. We should not expect the June/August quarter to have seen much damage to the breeding herd in the past quarter. These changes could limit production in the March/May and June/August 2013 time frames.

For short-term trading, we feel this seasonal September bounce is still intact. It was interesting to see the lower corn did impact December and the remaining deferreds. We are happy to see the October futures position is near its objective. As we move into the later part of this week and early next we would like to lighten up a little…Rich Nelson

Cattle: There was some light cash cattle trade in the Southern Plains at $123 Wednesday. This was bad, but not the rumored $122 we heard about Tuesday.

As noted Wednesday morning, Friday’s Cattle on Feed report indicated weak August marketings of 5% lower than last year. In recent weeks, feedlot style slaughter was around 3% lower than last year. Are we seeing a deluge of available cattle hitting the market right now?

For now, we have to assume this is part of the expected short-term weakness for the end of September. Keep in mind this does not change the actual number of cattle to be marketed in the January to April time frame. While you can make a moderately mild argument that nearbys needed this price break, we cannot suggest this changes either supplies or demand for cattle in 2013. That is where the shortfall in numbers will show up…Rich Nelson

About the Author

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.